Quantitative Finance and Insurance

The course aims at presenting the main valuation and hedging techniques for derivatives, mainly futures and options. Lab sessions for application of the theory (Excel based) are included. 

 Ability to evaluate and hedge the main derivative contracts on stock markets.

 lectures + lab

 

1. The exam will be closed books, with 3 sets of exercises: Luciano (50% of the grade), Kenett (25%), Schoenleber (25%). Students will be given 2 hours. Retake of the entire exam only is possible.

 

lab

 

  First part: from Financial Economics to Math Finance (Financial Mathematics), Fin. Math straight away
- Fundamental Pricing Theorem
- Its use for derivative assets
Second part: applications (theory and computer lab):
1. Swaps
2. Forwards and futures
2. European Options:
- Pricing, Black Scholes for stock options, fixed income options and options on futures
- Hedging: naked and covered positions, stop-loss strategies, delta and gamma hedging in discrete and continuous time
- Hedging errors and valuation of hedging strategies
3. Applications of derivative pricing to credit and counterparty risk
- Option theory in order to evaluate credit risk
- Credit derivatives

for Prof. Luciano's part:

a) B. Dumas, E.Luciano, The Economics of Continuous-time Finance, MIT Press, 2017.

https://mitpress.mit.edu/books/economics-continuous-time-finance

b) J.Hull, Intro to derivative securities, 10th edition

You can find an updated version of lectures timetable in the section "Materiali didattici".